What does “Formation of Contracts” mean,
as related to Executive Session in the
Davis Stirling Act – Brown Act?

Civil Code §4935.
Executive Session Meetings.

(a) The board may adjourn to, or meet solely in, executive session to consider litigation, matters relating to the formation of contracts with third parties, member discipline, personnel matters, or to meet with a member, upon the member’s request, regarding the member’s payment of assessments, as specified in Section 5665.
Property Negotiations  Only to discuss, with an agency’s identified bargaining agent, price or payment terms. The parcel, negotiators and the prospective seller or purchaser must be identified on the agenda. (§54956.8) Final price and payment terms must be disclosed when the actual lease or contract is discussed for approval. (§ 54957.1(a)) Learn more  Brown Act Pocket Guide   
AB 1264 2005 Leslie would have eliminated formation of contracts as an excuse to go into executive session
Civil Code §4930. Limitations on Meeting Content.

1363.05.   (a) Common Interest Development Open Meeting Act.

Civil Code §4925. Open Meetings; Open Forum

The requisites for formation of a legal contract are

  • an offer,
    • An offer is defined by Treitel as “an expression of willingness to contract on certain terms, made with the intention that it shall become binding as soon as it is accepted by the person to whom it is addressed”, the “offeree”.[1] Wikipedia.org/
  • an acceptance,
  • competent parties who have the legal capacity to contract,
  • lawful subject matter,
  • mutuality of agreement,
    • Agreement entails the transformation of negotiations into a settled bargain or deal. The negotiating process is obviously not contract and the law needs to be able to determine when that process has ceased and the parties have reached finality in their commercial arrangement. The traditional approach to answering the question: have the parties reached agreement? is to apply the rules of offer and acceptance. When a properly constituted offer has been made by one party and accepted by the other, then there is agreement at the moment of acceptance or, more precisely, at the moment of communication of acceptance.

      This apparently simple process raises a number of questions which we have to look at, such as: Was an offer made at all? Who makes an offer in certain types of transactions, for example, in auctions or tenders? Is a price list an offer? Is an advertisement an offer? Then it is also necessary to answer further questions about the act of acceptance, such as: does acceptance have to be communicated? Can you accept by silence? Can you accept by just getting on with the commercial task? and so forth.

  • consideration,
    • what might be exchanged in order to amount to a good consideration. The relationship between the rules of offer and acceptance on the one hand and the rules of consideration on the other hand is that the exchange which constitutes an acceptance of an offer – in effect an exchange of promises is brought about by acceptance – is at the same time the necessary exchange which constitutes the consideration. 
  • mutuality of obligation, and,
  • if required under the Statute of Frauds, a writing * Civil Code 1550 (1) (2) *  legal-dictionary.thefreedictionary.com/

Learn More 

Questions – FAQ’s

My association let bids for re-striping the parking lot.
We got 3 bids. the board discussed the merits of the three bidders and elected to take one of them.
Is this a matter relating to the formation of contracts with third party?


I’m not an attorney so here’s a link to a website done by an attorney on this matter. davis-stirling.com

In my own HOA the Judge “ruled” that the initial bid must be open to all members, but after that the Board could go into executive session. Unfortunately, the ruling wasn’t in writing, so the HOA just continues to make up rules as they go along.

Personally, I can’t understand why someone who gets elected to the Board all of a sudden thinks they are expert on everything and don’t need to listen to any input from the members, who pay mortgages and HOA fees. Plus, the members are the ones who will be using the product or service and may well be on the Board next year.

6 comments on “Formation of Contracts – Executive Session

  1. Is IDR Internal Dispute Resolution only used for overdue dues I am attempting to use it for a board decision that affects property values

  2. The Board at my HOA shows up to Board meetings sometimes with several contracts to be “ratified.”

    Typically, this is the first time owners learn that the subject matter of the contract has been addressed by the Board.

    In addition to forming a contract, which can be done in Executive Session, it seems to me the Board must first hold a discussion in an open board meeting as to whether a certain issue should be addressed, as well as the financial considerations around undertaking the issue. For example, our Board decided some time around March it was going to replace the roof. During the ensuing board meetings, nothing about the roof was mentioned. Then in July the board comes in and “ratifies” the contract with the roofing contractor of its choice (the one to whom the property manager had ties and possibly kickbacks).

    Contract formation cannot possibly encompass all of the deliberation and decision making needed to get to the point of ratifying a contract.

    Is there anything other than this common sense and the mandate that the executive session exceptions to open meetings must be construed narrowly — that says those components of undertaking an action — such as the decision to replace the roof — that come before selecting a contractor must be done in open board meetings?

    • I agree with you. How can anyone make an intelligent decision whether they are on the Board or simply a property owner without time to review all the facts, information and issues.

      In 2005 there was a bill to eliminate contract formation as a reason to go into secret (executive) session. Executive Session agenda’s must list on the agenda in general what is being discussed.

      I think it’s a good thing that the members must ratify contracts in your HOA. It’s my understanding that’s not required under the Davis Stirling Act.

      IMHO when the Board does all these things in secret without getting all the facts and input from the people who are paying the bills and using the benefits of the contract, they are in violation of the business judgement rule.

      Boards are required to have an agenda for Executive Session. Unfortunately Boards don’t seem to think so.

      Sample Agenda

      1. Legal issues re construction defects.

      2. Review painting contract proposals.

      3. Disciplinary hearings.
      a. Pet leash violation
      b. Disabled vehicle parking violation
      c. Hardwood floor violation

      4. Assessment Issues.
      a. Approve foreclosure on delinquent unit
      b. Review possible payment plan for delinquent owner

      5. Personnel issues.

      Notice of executive session meetings must also contain an agenda. (Civ. Code §4920(d).) Because executive sessions are confidential and topics are generally noted in open meeting minutes (Civ. Code §4935(e)), agenda descriptions are more circumspect. https://www.davis-stirling.com/HOME/Meeting-Agenda-Required

      Noted in Open Meeting Minutes. Even though members do not have the right to attend executive sessions, boards must keep members informed about the general nature of the business conducted in their executive sessions. The minutes of the next open board meeting must generally reflect the board’s executive session:

      Any matter discussed in executive session shall be generally noted in the minutes of the immediately following meeting that is open to the entire membership. (Civ. Code §4935(e).) davis-stirling.com/Executive-Session-Minutes

  3. Our association leases part of our complex to a business. Once the lease is signed by both parties, is the lease considered a contract which can be shown to homeowners, at their request? According to Davis-Stirling: Once contracts have been approved by the board, they can be reviewed by the membership. (Civ. Code §5200(a)(4).)

    • The code you site guarantees the right of the homeowners to see the contract through the inspection proces §5200 et seq. Why not let the homeowners see the drafts now? Why not open the negotiation meetings to the HOA? Maybe someone in your membership knows a business that would pay more rent?

      If a homeowner finds something objectionable in the contract, what good does it do, after the fact?

      Just because the board may have the right to keep the drafts of the contract secret, is there a need to?

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